New figures show beneficiaries are moving through a revolving door of different benefit categories.
The Government's overhaul of the welfare system has been touted as an effort to get people into work.
A longstanding challenge for successive governments has been preventing the merry-go-round ride through the benefit categories that befalls many beneficiaries.
But figures provided in answer to written parliamentary questions by Labour show more than a third of people who came off a benefit, for reasons other than finding work, went on to another benefit in the three months to June 30.
They show 50,561 people came off a benefit but did not go into work.
Of those, 18,525 transferred to another benefit.
A further 8491 saw their benefits stop for reasons associated with paperwork - they did not reapply, their medical certificate lapsed or they failed to be work-ready.
Labour's social development spokeswoman, Jacinda Ardern, said she was concerned about what happened to people who may legitimately be entitled to a benefit.
"Where are these people going? And where are they being picked up in the system?"
If people fell through the cracks they cost taxpayers through the justice, corrections or health sectors, she said.
"These kind of numbers indicate that there are a high number of people who may not be being supported out in the community."
The figures show 1970 people stopped getting their benefit because they left New Zealand.
Ms Ardern said it was possible others who had listed the reason for stopping their benefit as "obtaining work" had also moved overseas.
"The 2000 who are leaving New Zealand go to nothing; to go to no safety net whatsoever, in order to just give themselves a chance of finding work, sends a really strong message, I think, about desire to have hope and have work."
In August, Social Development Minister Paula Bennett said despite an increase in the overall number of people on benefits, 6225 people left for work in July.
"It's pleasing to see that despite a flat labour market people are consistently moving off benefits and into work each month,” she said.
Mrs Bennett said yesterday 21,752 people cancelled their benefit because they moved into work in the three months to June.
"We're talking about 320,000 people and their individual circumstances."
Movement between benefits was common under the former Labour government, she said.
The overall number of beneficiaries had fallen from a peak 347,107 in January 2010 to 320,041 at the end of June this year, she said.
HOW A BENEFIT IS LOST
People of working age whose benefit was cancelled for reasons other than ‘obtained work' from April 1, 2012, to June 30, 2012.
Excess income/assets: 713
Left or ceased a course: 372
DPB recipients no longer with dependants: 528
Change in marital status: 2659
Transferred to another benefit: 18,525
In prison: 1070
Left New Zealand: 1970
Didn't reapply: 2301
Eight weeks after advising of change in circumstance: 9983
Fulltime student: 3430
Lack of representation (didn't do something required): 1289
Lack of medical coverage: 3201
Failed the work test: 1700
- The Dominion Post
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